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Update on OFT Test Case & Frequently Asked Questions

Latest Update – April 2009

The OFT has announced the next phase in its ongoing enquiry into overdraft fees.  To streamline and potentially shorten the enquiry, the OFT has decided to look at a representative sample of three UK banks current account terms and conditions, including those of Clydesdale Bank (of which Yorkshire Bank is part)

The OFT has made it clear that the selection of the three banks is not to be seen as an indictment of these banks - they are purely representative of the different terms and conditions that exist among the many banks and building societies that offer current accounts and overdrafts in the UK. We certainly welcome this initiative and we will continue to cooperate fully and constructively to the ongoing enquiry.
 
The OFT investigation is running in parallel with the High Court test case. The banks have just been granted leave to appeal to the House of Lords and the Hearing will take place on 22nd, 23rd and 24th June 2009.

Background

Seven banks and one building society are currently engaged in a High Court test case with the OFT to decide the legality of unarranged overdraft charges. The first stage of the test case process was heard by the Court between 16 January and 8 February 2008 and dealt with certain preliminary issues of legal principle in relation to the terms and conditions used by the Banks at that time. On 24 April 2008 the Court issued its judgment on this first stage of the test case process. It decided that the current charges cannot be penalties, but that they can be assessed for fairness.

The Banks appealed the Commercial Court's decision on the question of whether the unarranged overdraft charges examined by the Commercial Court could be assessed for fairness.  The appeal was heard by the Court of Appeal on 28, 29 October and 4 – 6 November 2008.  On 26th February 2009 the Court of Appeal issued its judgment. The Court of Appeal, with some hesitation, upheld the Commercial Court's judgment that the Banks’ current terms and conditions relating to unarranged overdraft charges can be assessed for fairness. Given the importance of the test case, the Banks applied to the House of Lords for permission to appeal the Court of Appeal’s judgment.

Frequently Asked Questions 

What is happening?

The Office of Fair Trading (OFT) and a number of UK banks and building societies are involved in a court case to decide on the legality of unauthorised overdraft charges.  The institutions are: Abbey; Barclays Bank; Clydesdale Bank (including Yorkshire Bank), HBoS; HSBC; Lloyds TSB; Nationwide; and, Royal Bank of Scotland.

This case is being called a "test case" because the decision will clarify the law in this area and is likely to apply to most current and new claims against current account providers about unauthorised overdraft charges.  We will continue to post updates on our website to keep customers informed of progress on the test case as this could run for at least a year. 

What will happen to customer complaints about unauthorised overdraft charges?

Banks and Building Societies will not be dealing with or resolving customer complaints on unauthorised overdraft charges relating to personal current accounts, while the test case is running.

If you have recently complained, or intend to, about your personal current account unauthorised overdraft charges, we will write to tell you that we have received your complaint and that we will record it on your file.  When a final decision is reached in the test case, we will contact you as soon as possible to tell you how we will resolve your complaint.  We will apply the decision in the court case to all complaints we receive.

We will continue to deal with, or resolve any complaints relating to business accounts, credit cards and also cases of genuine financial hardship. 

Why are the banks allowed to stop dealing with unauthorised overdraft charge complaints during the test case?

With the other banks, we have applied to the Financial Services Authority (FSA) for a suspension of the normal timetable for dealing with personal current account unauthorised charge complaints.  The FSA decided that, in the circumstances it was appropriate to grant us a suspension of our obligations under the FSA's complaint handling rules while we seek legal certainty on this issue.  The suspension is subject to a series of conditions designed to protect customers' rights. You can read the form of the FSA suspension here: www.fsa.gov.uk

All customers who have made a written complaint on unauthorised overdraft charges relating to personal current accounts, who have not yet had their complaint resolved will have received a letter to explain the position with respect to their complaint.

Can I make a court claim for a refund during the test case?

Yes, but if there is no additional information provided which would suggest that the case should not be suspended pending the outcome of the test case, we will apply to the court to put your case on hold while the test case is running.  This is because the issues being raised in customer complaints on unauthorised overdraft charges are being considered in the test case. 

Can I complain to the Financial Ombudsman Service (FOS) about my bank charges?

Yes, you can make a complaint to FOS but if they do not identify additional information which would suggest that the case should not be suspended pending the outcome of the test case, it will not be reviewed until the outcome of the case is known while the test case is running.  You can read what the FOS has said here:

www.financial-ombudsman.org.uk 

How long will the test case take?

At this time it is too soon to give any exact timescales for a conclusion to the test case but it could go for more than a year. We have agreed with the OFT and the FSA to conduct the test case in an efficient, prompt and orderly way. 

Where can I find out more?

You can contact us through your branch or by calling us on 0800 22 24 26, choosing Option 6 and then Option 1.

Alternatively, you can find more information through the following links:

The Financial Service Authority
www.fsa.gov.uk

The Office of Fair Trading:
www.oft.gov.uk

The Financial Ombudsman Service:
www.financial-ombudsman.org.uk